English Property Law
The ownership of land in England and Wales is shown and proved by registration in the Land Registry, rather than by holding and producing deeds. The Land Registry is a Government backed register. Registration of ownership in the Land Registry has been compulsory in the whole of England and Wales since 1990. Upon any transaction affecting lands, including leases more than seven years, sales, mortgages and other transfers, the ownership must be registered, unless it is already registered. This means that nearly all land is in the Land Registry System.
The Land Registry file or “Title” contains three parts. Each Title has a unique number consisting of a County Code and number. It is very similar to a folio under the Irish Land Registry system. The first part is a description of the property and any rights attaching to it. All property is identified with reference to a high quality ordnance survey map.
The second part sets out the identity of the owner. The Land Registry will generally note the legal owner so that beneficial or equitable owners are not directly noted. Their rights may however be protected by a restriction which is the equivalent of a caution under the Irish Land Registry system.
The third part of the Register consists of rights which affect the land. Land may be affected by various charges which are of little practical significance to a mortgage holder. It is critical however, that the bank’s legal charge is registered as the first financial charge in order.
Registered Legal Charge
The Land Registry rules state that a security over property in England and Wales must be created as a “legal charge”, which must be registered in the Land Registry. A legal charge gives its holder almost the same rights that a common law mortgage of unregistered title land would do. It is not quite as far reaching as a common law mortgage of unregistered land, as the charge holder is not deemed owner of the land to the same extent as a mortgagee. The practical effect of this distinction is minimal because a charge holder is deemed to have the same rights as a mortgagee, including a right to possession.
A legal charge must be created by a deed. This is a legally binding document signed in a formal way. It must be in the prescribed Land Registry format. The legal charge is the mortgage deed. If there are a number of charges, the charge which is registered the first in time, will have first call on the sale proceeds. The order of priority of registration of legal charges is of key importance. Registered charges have priority in order of time of registration so that the earlier registered charge has priority to the later registered charges.
A mortgage or charge necessitates an underlying debt for which the charge is security. In the absence of an underlying debt, present, future or contingent, the charge is of no effect and is redeemable by the borrower. There should be covenant which provides for repayment of the sum advanced and interest.
Title deeds in England are fewer in quantity than encountered in Ireland. The Land Registry has sought to de-materialise title since 2002 so that the charge certificate (which would be equivalent to the Irish Land Certificate) is no longer issued and is of no value. Therefore custody of the original title deeds will be less significant.
First Legal Charge
A bank will generally wish to ensure that the borrower holds absolute registered title to the security, that it holds a first registered charge and that there are no adverse restrictions, either on the title or in respect of other legal compliance issues such as planning permission, building control, restrictive covenants etc.
A first registered charge gives a lender sufficient ownership to sell a property without getting any further documentation signed. Provided possession can be peacefully obtained, it is not in fact necessary to obtain any court order to sell the property. It does not matter for example that the borrower may have died in the meantime, lost mental capacity etc.
As in Ireland, a first legal charge by an individual can mortgage and secure land, buildings and fixtures only. Moveable chattels or goods can in theory be mortgaged by an individual. However, the Bill of Sales Act requires that such mortgages must contain prescribed information as to the precise moveable items concerned and must be filed within seven days in the Courts Offices. The technicalities and difficulties surrounding registration of such chattel mortgages by individuals makes them impractical. The result is that a legal charge granted by an individual cannot cover fittings and movable contents. Companies can more easily grant security over all their assets.
Security Creation Procedure
In the case of owner occupier or residential investment properties, most lenders act on the basis of a certificate from the borrower’s solicitor in the standard Council of Mortgage Lender’s Handbook form.
A lender may retain its own solicitor to investigate the borrower’s ownership of the land and other legal issues, to ensure the signing of the mortgage deed and the registration of the bank as owner of the charge. Many lenders use their own form of Certificate of Title, particularly in commercial cases.
Certificates of title consist of a series of confirmations and undertakings to the lender in relation to a range of legal issues affecting the property, ranging from ownership, legal compliance issues, and issues which are relevant to the saleability of the property. The CML certificate also covers certain pre-drawdown matters which are wider than those which apply under the Irish Law Society Certificate of title.
If the solicitor is not in a position to give all the confirmations implied in the certificate of title, then he is obliged to disclose any defects or shortfalls and obtain the bank’s approval in advance. If the borrower refuses consent to disclose, the solicitor must not proceed and must not act for the bank. If the solicitor does not comply with the obligations in the Certificate or fails to make required disclosures, he may be liable to the bank for breach of duty and negligence, in the event that the bank suffers loss as a result.
Personal Liability on Mortgage Debt
An individual borrower is personally liable for the loan, unless the lender specifically agrees that recourse is limited in some way. The loan is a personal debt which may be sued for in debt collection court proceedings. There are special, shorter more simplified Court procedures for a fixed sum debt. Where a court order is given it can be enforced against the borrower and all of his assets in a number of ways.
Most bank loans may be enforced under the debt collection court procedures in the England and Wales Civil Procedure rules. The loan offer may state where legal proceedings may or must take place. Generally under European Union rules, a consumer must be sued in his home state. There is an exception in relation to claims affecting property such as a claim for possession under the mortgage.
In the case of an Irish resident borrower, the debt may enforceable in the Irish Courts, depending on what the loan offer allows or requires. An action for enforcement of security over English property must be enforced in England. There is no incompatibility in suing for a debt in one jurisdiction while suing to enforce the mortgage in another jurisdiction. If the security is sufficient, it would not be usual to enforce the debt.
Generally, there will be little defence to a claim on a debt against a borrower either under the Irish Rules of Court and under the English and Wales Civil Procedure Rules. A Court judgment or Order can usually be obtained declaring liability for debt without the need for a Court hearing, if the borrower does not defend the proceedings. This will usually be the case, unless there is some real dispute about the debt.
If a judgment or court order is obtained in Ireland or in England and Wales, it can be enforced in the other country. There are procedures under the EU Judgment Convention by which a judgment or court order obtained in one jurisdiction can be certified and have full effect as if it was a judgment or Court Order of the other jurisdiction.
Once a judgment has been obtained, there are various remedies under Irish Law by which it can be enforced. There are equivalent remedies under England and Wales law. See our chapters in relation to the enforcement of Court judgments in England and in Ireland and on the cross border enforcement of judgments.
